GST impact to slowdown India's 2017-18 GDP growth to 6.5%

06 January, 2018

"The per capita net national income during 2017-18 is estimated to be Rs 1,11,782 showing a rise of 8.3 per cent as compared to Rs 1,03,219 during 2016-17 with the growth rate of 9.7 per cent", said CSO.

India's Gross Domestic Product (GDP) growth estimate has been lowered to 6.5% for 2017-18, as against finance minister Arun Jaitley's estimate of 7.5% announced in the beginning of the financial year. The manufacturing sector is expected to grow by 4.6% vs 7.9% the previous year, agriculture by 2.1% vs 4.9%, electricity and utility services by 7.5% vs 7.2% in the last fiscal. In the second quarter, the economy showed signs of revival as the GDP growth rate picked up and stood at 6.3 per cent.

GDP had grown by 6 per cent in the first six months of FY18. But before the GDP figures announced, Finance Ministry officials said slower economic growth was likely to hit revenue collections this year, forcing them to resort to borrow from the market to meet spending targets.

Mr Sinha said accelerating GDP growth from this level and maintaining it close to 8 per cent will be a tough task even after the economy begins to reap the benefits of GST.

On the other hand, growth in the "agriculture, forestry and fishing", "mining and quarrying", "manufacturing" and "construction" sectors "is estimated to be 2.1% (from 4.9%), 2.9% (from 1.8%), 4.6% (from 7.9%) and 3.6% (from 1.7%)", respectively.

The EAC-PM Chairman said the advance estimate numbers only reinforce what was already known - that reforms undertaken by the government will place the economy on an upward growth trajectory, without compromising on fiscal consolidation.

Anis Chakravarty, Lead Economist, Deloitte, said the estimate for yearly GDP showed that the growth momentum was expected to improve in the coming quarters in line with expectations and signals from leading indicators.

The International Monetary Fund (IMF) expects India's GDP to grow at 6.7 per cent in 2017-18.

The CSO's GVA full-year growth estimate of 6.1%, compares with a 6.7% pace that the Reserve Bank of India had forecast at its December policy meeting.

"Accordingly, the advance estimates for GDP and GVA growth appear to be understating economic expansion for FY2018, in our view". "While this gives the impression of a downturn, in reality, growth has bottomed out in the first quarter of the current year and is now on a recovery", the Confederation of Indian Industry (CII) said in a release.

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